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Pay Rises Put On Hold - The Australian

Published Mon, January 12 2009 4:10pm

Fair Pay Commissioner Ian Harper has warned low-paid workers that the protection of jobs will be the guiding force in his final deliberations on the minimum wage.

Despite rising inflation, the man charged with setting the minimum wage has confessed he is deeply concerned that any movement that is too aggressive could exacerbate unemployment, reports The Australian.

In an interview with The Australian yesterday, Professor Harper predicted the economic slowdown would make his 2009 decision the most difficult by far.

Since 2006, the economist has helped deliver a total of $60 a week in pay rises to the nation's lowest-paid workers.

But he warned the buoyant economic conditions that allowed those rises were over. Inflation will probably still be 3 to 3.5 per cent this year Professor Harper said.

So you've got the worst of both worlds: you've got inflation still rising -- which is undermining people's purchasing power in the usual way -- and you've got unemployment rising because the economy is slowing.

We can get caught either way. If we put the minimum wage up too high, that can induce employers to sack people.

If we don't put the minimum wage up fast enough, people leave the labour force and go on to the unemployment rolls.

Last July, the Australian Fair Pay Commission surprised business by granting 1.3 million low-paid workers a $21.66-a-week rise in the minimum wage, for a base rate of $543.78 a week.

Business had called for a $13.30 rise and the ACTU had wanted $26 a week.

A Howard government appointee, Professor Harper was branded a "lackey of business" by unions, but silenced his critics with increases of $26 in 2006.

ACTU secretary Jeff Lawrence said unions did not accept a link between employment and movements in the minimum wage.

"We certainly do think there's a lot of room for collective bargaining to respond to the challenges in particular industries.

But we don't think the lowest-paid workers should bear the brunt. I don't accept there isany trade-off between employment and the level of minimum wages. Professor Harper said the government could complicate his job by making the safety net more generous.

"If they increased unemployment benefits or made it easier to get benefits, then we would have to be cautious," said Professor Harper.

A decision to keep the minimum wage at its current level could conceivably make it more attractive for "people to say 'forget about it' and just go on unemployment benefits", he said.

Source: http://www.news.com.au/business/story/0,27753,24900646-462,00.html on Monday 12th January 2009